M/S THE MALWA GRAMIN BANK,SANGRUR vs. DY COMMISSIONER OF INCOME TAX, SANGRUR

ITA 156/CHANDI/2017Status: DisposedITAT Chandigarh29 September 2026AY 2011-1213 pages
AI SummaryRemanded

What were the facts?

The assessee, M/s Malwa Gramin Bank (now Punjab Gramin Bank), filed appeals against orders of the Dy. CIT/CIT(A) for Assessment Years (AY) 2011-12, 2014-15, and 2015-16. The appeals concerned the disallowance of provisions made for bad and doubtful debts. For AY 2011-12, the disallowance was Rs. 17,61,000/-. For AY 2014-15, it was Rs. 36,00,000/- related to provisions made out of standard assets. For AY 2015-16, the disallowance was Rs. 38,96,000/- also for provisions for bad and doubtful debts out of standard assets. The assessee contended that these provisions were made as per Reserve Bank of India (RBI) guidelines. The revenue, through the Assessing Officer (AO) and CIT(A), argued that provisions for standard assets were not covered under Section 36(1)(viia) of the Income Tax Act, 1961.

What did the Tribunal hold?

The Tribunal noted that all the appeals involved a common issue regarding provisions for bad and doubtful debts under Section 36(1)(viia). The Tribunal referred to a Special Bench decision in the assessee's own case (ITA No. 156/Chd/2017, ITA No. 425/Chd/2017, ITA No. 1181/Chd/2018 & ITA No. 283/Chd/2019) dated 05/05/2026. In that decision, the Special Bench, considering the Karnataka High Court's ruling in Bellad Bagewadi Urban Souhard Sahakari Bank Niramit vs. CIT, held that banks are bound by RBI guidelines and that provisions made for standard assets as per these guidelines should be allowed as deduction under Section 36(1)(viia), subject to the overall ceiling. The Special Bench answered the reference in the affirmative. However, the present bench, after considering the rival submissions and the Special Bench order, concluded that the matter required re-adjudication at the level of the Ld. CIT(A) to take into account the Special Bench decision. Therefore, the appeals were restored to the file of the Ld. CIT(A) with directions to re-adjudicate the issue in accordance with the Special Bench's decision. The issue of interest under Section 234D for AY 2011-12 was not explicitly decided.

What were the issues?

1. Whether the disallowance of provisions made for bad and doubtful debts under Section 36(1)(viic) (for AY 2011-12) and Section 36(1)(viia) (for AY 2014-15 and 2015-16) is legally sustainable, particularly concerning provisions made out of standard assets, in light of RBI guidelines. Assessee's Contentions: - The provisions for bad and doubtful debts were made strictly as per RBI guidelines, which is the statutory regulatory authority for banks. - Section 36(1)(viia) is a beneficial provision incentivizing rural finance and should be interpreted liberally. - The deduction claimed was within the limits prescribed by the subsection. - Relied on the decision of the Hon'ble Karnataka High Court in Bellad Bagewadi Urban Souhard Sahakari Bank Niramit vs. CIT and a Special Bench decision of the ITAT in the assessee's own case. Revenue's Contentions: - The Ld. DR relied on the orders of the lower authorities. - The AO relied on a plain reading of the Act, stating that provisions for standard assets are not covered under Section 36(1)(viia) as these assets are earning interest and are not bad or doubtful assets.

Which sections of the Income-tax Act were involved?

Section 36(1)(viic),Section 36(1)(viia),Section 234D

AI-generated summary — verify with the full judgment below

Heard together (3 matters)

ITA No.156 /Chd/ 2017
ITA No.1181 /Chd/ 2018
ITA No.283 /Chd/ 2019

Read from the judgment's own cause title. This page is filed under one of them.

आयकर अपीलीय अिधकरण,च"ीगढ़ "ायपीठ “बी” , च"ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: VIRTUAL MODE "ी लिलत कुमार, "ाियक सद" एवं "ी िवजय वमा" , लेखा सद" BEFORE: SHRI. LALIET KUMAR, JM & SHRI. VIJAY VARMA, AM आयकर अपील सं./ ITA No.156 /Chd/ 2017 िनधा"रण वष" / Assessment Year : 2011-12 M/s Malwa Gramin Bank बनाम The Dy. CIT Prem Basti Road, Opp. D C Office Circle, Sangrur Sangrur "ायी लेखा सं./PAN NO: AAAJM0359C अपीलाथ"/Appellant ""थ"/Respondent आयकर अपील सं./ ITA No.1181 /Chd/ 2018 िनधा"रण वष" / Assessment Year : 2014-15 M/s Malwa Gramin Bank बनाम The Asst. CIT Prem Basti Road, Opp. D C Office Circle, Sangrur Sangrur "ायी लेखा सं./PAN NO: AAAJM0359C अपीलाथ"/Appellant ""थ"/Respondent आयकर अपील सं./ ITA No.283 /Chd/ 2019 िनधा"रण वष" / Assessment Year : 2015-16 M/s Malwa Gramin Bank बनाम The Dy. CIT Now knows as Punjab Gramin Bank Circle, Sangrur Prem Basti Road, Opp. D C Office Sangrur "ायी लेखा सं./PAN NO: AAAJM0359C अपीलाथ"/Appellant ""थ"/Respondent िनधा"रती की ओर से/Assessee by : Shri Inderjit Abhilashi, CA, Shri Saksham Abhilashi, C.A Shri Rohit Kapoor, Advocate & Shri Virsain Aggarwal, ITP राज" की ओर से/ Revenue by : Smt. Vanda

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